Trying to tame a Chinese tiger

The world's fastest growing economy, China's real GDP is increaing at a breakneck speed.
China's exports this year are expected to soar by 20.8% while imports rise by 18.4%.

Two features of China's economic story compel immediate attention.
The real GDP growth rate reached 11.3% in the second quarter this year, the fastest pace in a decade.
This rate has been driven by heavy spending on new factories and other fixed assets.(Investment)

Earlier last week the World Bank forecast that it expected China's economy to grow this year by 10.4%.

Investment in some industries such as car manufacture exploded by 44.5% in the first six months of this year.

While it seems to be great having such fantastic figures. However, there are also dangers or risks of having such high growth rates.

The dangers/risks will be:
1) High inflation
2) High bad debts
3) Too much short-term spending without sound fundamentals
4) High gearing ratio (too much debts to finance investment)




http://business.scotsman.com/index.cfm?id=1222302006

Excess Capacity at Proton

We have learnt about excess capacity in monopolistic competition and other imperfectly competitive market structures.

What is excess capacity then?? Revision

In this article, it was mentioned that Proton, our national car maker is running on 40% spare or excess capacity, meaning that Proton is operating at 40% less than the optimum (ideal) capacity. A cause for concern no doubt.

"Some of the trucks load to just to 60%," he says, "compared with 90% at Toyota. We're paying for air." Zainal admits that Proton's three assembly lines have about 40% spare capacity.

What could be the reason(s) for the fall in sales of Proton cars??

BMW ( in conjunction with the World Cup fever)

Barriers to entry in the form of technical know-how - One good example is the company BMW (even though BMW is not a monopoly) in the automobile manufacturing.

In the motoring world, certainly everyone has heard of this name before.
It is synonymous with supreme German precision in engineering , incomparable engine performance, sublime quality finishings and ultimate driving experience. No wonder its motto is "Ultimate Driving Machine"

However, very few people know what the acronym BMW really stand for??
Do you know what BMW stands for??
One student said : Business Motor Wehicle ( very creative indeed!!)
Maybe it is more applicable for IBM (International Business Machines)
Well, BMW really stands for Bayerische Motoren Werke in German or Bavarian Motor Works in English.
The company was founded in Bavaria, that's why it contains the word 'Bayerische', someone noted that it is similar to the world famous football club Bayern Munich..yes, the club shares the same origin with BMW whereby they are both are formed in the city of Munich, Germany.

The blue-and-white logo BMW still uses (illustrated above right) represents the blue and white checkered flag of Bavaria and also indicates the origin of BMW by symbolizing a spinning white propeller on a blue-sky background.

For more information
Read this link for everything about BMW

http://en.wikipedia.org/wiki/BMW


Barriers to Entry - BMW's techincal know-how in automative engineering had become barriers to entry for new automative firms intending to join the industry. What say you???

World's Most Expensive Cities

Do you know where is the most expensive city in the world??
Due to the exchange rate fluctuations and the rise in property prices, certain cities are getting more and more expensive to live in.
The surprising thing is that the cost of living in cities like London, New York, Tokyo and Paris does not seem to deter people from visiting both for leisure and work.
Well, the temptation is too much to reject I guess



The survey by Mercer Human Resource Consulting ranked 144 cities around the world, measuring the comparative cost of more than 200 items such as housing, transportation and food. The survey is aimed at helping multinational employers determine compensation for their expatriate workers.

Ranked No.1 is Moscow, No.2 : Seoul No.3: Tokyo

Moscow is so expensive to live in..I never thought of that..

Here is the list of the Top 50:

http://biz.yahoo.com/ap/060626/world_s_expensive_cities_glance.html?.v=1

Kuala Lumpur is not even in the list of Top 50. Disappointed??
Is it a good thing or a bad thing??

Why is it good to be Young?

Read this article today.

Malaysian employers tend to perceive older workers less favourably compared with younger ones, a global study commissioned by HSBC Bank reveals.

Apparently, young workers are perceived to be more energetic, aggressive and able to work at a higher tempo as they have higher endurance level.

However, older workers ( I mean over 50s) tend to be regarded as seasoned, vastly experienced and loyal..( there are little options of where they can go at this ripe age)

I believe that the COST could be the reason.
Whilst you can offer a young turk for a paltry sum RM2000 as his/her first employment salary,
after hiring, get him/her to work as hard as possible..loading him with the work of 3 or 4 persons..with a promise of a promising career prospect. I am sure a great majority would fall for that. Some made it, some don't

As compared to older workers, a firm can't possibly pay them 'chicken feed' and expect them to work just as hard. Seasoned as they are, they have the guts to demand higher returns for what they have contributed back to the firm. This represents high cost to the firm.
The maxim goes," Why hire a dispensable older worker when you can hire someone who can work as hard but commands one-third his salary?"

So, what should firms do to the older workers after hiring young blood??

Accelerate their departure by offering them VSS ( Voluntary Separation Scheme) i.e. Optional retirement benefits.


http://biz.thestar.com.my/news/story.asp?file=/2006/6/16/business/14543819&sec=business

12% Rise Electric Shocker!!! Zapped !!

The announcement of the higher electricity tariffs would definitely strike fear in every consumer.
As if the rise in the petrol prices are not enough, now the consumers (especially the lower income group) will be feeling the pinch as far as their lifestyle is concerned.
The announcement did not come as a surprise as the Cabinet had deliberated on the matter for quite a while now.
Was wondering, what's next in the queue:

1) Water rates
2) Toll rates
3) Water treatment rates
4) Telephone bills
5) Business licenses
6) Other taxes


Further Increases in Costs of Production

The rise in these 'utilities' lead to an increase in the cost of production, the rise might shift the supply curve to the left, culminating in an increase in the market(equilibrium) prices of goods and services in the country.
As our nominal/money wages remain constant( or negligible increase in money wages), the households' purchasing power is deteriorating gradually.



Any chance of reversing this scenario?

The government's reaction/advice/pacification:
To have a smaller electricity bill, people should learn how to conserve energy and cut down the usage by minimising wastage.

“The new tariff structure encourages consumers to conserve energy instead of using electricity as if there is no tomorrow,” he said, giving an example that consumers need not set their air-conditioner at 16°C and that 24°C was good enough.

Each time there is an increase in prices of anything, this familiar quote will surface

"Even with the 12% tariff increase, he said, Malaysia still had the cheapest electricity in the region with the exception of Indonesia."

Does this sound familiar??? Hahahaha



My point is:
Well, the issue is ..should the 'wastage-reduction' mentality fall squarely on the shoulders on the people?
or shouldn't it be a responsibility of each and every person in the country, not just the households, as wastages can come in many 'forms'.

The Star reported:

http://www.thestar.com.my/news/story.asp?file=/2006/5/25/nation/14343755&sec=nation&focus=1

Petrol Prices Might Go Down (Yeah right!)

For a moment, i thought it was forthcoming. I was overjoyed!!!
However, having read the entire article
My hope of seeing petrol prices going back to RM1.30/liter during the good ol' days of 2002-2004 went up in smoke.

For prices to rise, it took only an announcement..
For prices to tumble, it is subject to many constraints.

According to the minister, prices will only fall if the world crude oil prices fell drastically...well, dream on.
Poor consumers.

Dr Awang, however, cautioned that while the price could drop to US$60 a barrel, it would be unreasonable to expect it to fall to US$30 a barrel.

http://www.nst.com.my/Current_News/nst/Wednesday/NewsBreak/20060524180907/Article/index_html